Reworking Walgreens

LAS VEGAS -- Trips and total basket ring are up in the drug channel, and Walgreens, in most cases, is performing as well or better than its competitionwhat better time to revamp its strategy and refocus its marketing efforts. "We've just completed a nine-month journey into customer insights," said company vice president and chief marketing officer Kim Feil. "Our goal is to become the preferred, routine destination of choice."

Feil, speaking at the IRI Summit 2009 in Las Vegas this week, said company executives are "rewiring ourselves so our category teams are reorganizing [image-nocss] our categories around occasions.... We have a positively viewed brand, and we're retaining that, but it doesn't say, 'Why should you come here today'."

Thus, the Deerfield, Ill.-based company will roll out in coming months a new marketing program that will target specific demographics of consumers identified by Walgreens as key segments. They are:
Efficient Eileen: A young Baby Boomer or older Generation Xer who seeks convenience and shops the store often. She enjoys efficiencies and information delivered at the shelf. Active Amy: She is a fickle but family-focused convenience seeker who is less likely to purchase products for stock-up purposes. Socialite Stella: This Walgreens devotee is considered a social-influencer, often shops for fill-in trips and tends to be African American. She likes to be in-the-know, treats shopping like a treasure hunt and gets to know the employees in the store personally. Merry Maria: This Walgreens-loyal shopper tends to be Hispanic, a parent and interested in getting health and wellness advice. She is concerned about her community and tends to review store circulars before shopping. Care-Seeking Carol: This older demographic (62 years old and older) is interested in personal health-care issues and does not typically use the Internet. She considers herself a traditionalist and is looking for a personal touch in terms of customer service. While noting that each of the new demographics is identified as a woman, Feil said the customers could just as easily be men.

In unveiling these demographics, Feil asked manufacturers in the audience to consider the descriptions and work with Walgreens in serving each group as best as it can. "We are creating tracking systems for every one of these segments," she said. "This is going to be a very different and measured approach for us."

In offering an example of how each demographic might be better served, Feil noted that Walgreens recently began reorganizing its stores. In one case, the previously spread out diapers, baby medicines and children's thermometers, among other baby products, were regroup into a "baby care" section. The result: 41% of baskets added another item.

Similar grouping is also under way for health-care products, beauty aids and vitamins, among other categories. This process, Feil said, may mean deleting some SKUs and adding others. "It's more important that we have the right assortment for our customers," she said.

The company said in its second-quarter fiscal 2009 financial statement that it opened or acquired 57 drugstores during the period for a net gain of 48 stores after relocations and closings. In the first half of the fiscal year, it opened or acquired 269 stores, compared with 282 in the year-ago period, with a net gain of 235 stores after relocations and closings. It agreed to acquire 12 Rite Aid locations in San Francisco and eastern Idaho. Last week, Walgreens also agreed to acquire 32 Drug Fair drugstores across northern and central New Jersey along with pharmacy files for 11 other Drug Fair locations.

Plunge in oil prices sets the stage for record margins and boost in in-store sales. Also In This Issue: Profitability skyrockets for top performers! Other channels seek to redefine convenience! The economy enters a new stage. The growing health-and-wellness trend. Fuel demand; oil's slide; multicultural momentum; and data, data, data!

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